Wells Fargo to pay $2B penalty to resolve mortgage abuse claims

By

Daniel Uria

Wells Fargo agreed to pay a $2.1 billion penalty to settle claims it issued mortgage loans it was aware contained incorrect income data, the Department of Justice said Wednesday. File Photo by David Yee/UPI | License Photo

Aug. 1 (UPI) --Wells Fargo agreed to pay a $2.09 billion penalty for issuing mortgage loans it was aware contained incorrect income information, the Department of Justice said Wednesday.

The bank agreed to pay the civil penalty under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 for the actions, which the government said contributed to last decade's financial crisis.

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"Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans," acting U.S. attorney for the Northern District of California, Alex G. Tse, said. "Today's agreement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted. Our office is steadfast in pursuing those who engage in wrongful conduct that hurts the public."

Under the deal Wells Fargo agreed to pay the penalty without admitting liability to resolve all civil claims under FIRREA. The government agreed to release Wells Fargo from any potential claims arising under the Program Fraud Civil Remedies Act, the Injunctions against Fraud Act and on certain other grounds, the company said in a statement.

"We are pleased to put behind us these legacy issues regarding claims related to residential mortgage-backed securities activities that occurred more than a decade ago," Wells Fargo CEO Tim Sloan said. "Wells Fargo remains focused on our important role as one of the nation's leading providers of mortgage financing and on our commitment to expanding sustainable homeownership opportunities for our customers."

The company added that "there were no claims that individual customers were harmed as a result of the alleged conduct."

The Justice Department alleged that Wells Fargo sold at least 73,539 stated income loans between 2005 and 2007, despite knowing a substantial portion contained misstated income. Nearly half of those defaulted, resulting in billions of dollars of losses to investors.